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FIL-54-97 Attachment

[Federal Register: May 8, 1997 (Volume 62, Number 89)]

[Notices]

[Page 25191-25192]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr08my97-79]


 

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FEDERAL DEPOSIT INSURANCE CORPORATION



 

Statement of Policy on Assistance to Operating Insured Depository

Institutions; Rescission of Policy Statement


 

AGENCY: Federal Deposit Insurance Corporation (the FDIC).


 

ACTION: Rescission of policy statement.


 

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SUMMARY: As part of the FDIC's systematic review of its regulations and

written policies under section 303(a) of the Riegle Community

Development and Regulatory Improvement Act of 1994, the FDIC is

rescinding its Statement of Policy on Assistance to Operating Insured

Depository Institutions (the Policy Statement). The Policy Statement,

which reflects various statutory requirements of the Federal Deposit

Insurance Act (the FDI Act), provides criteria for the FDIC's

consideration of proposals it receives for assistance to operating

insured depository institutions under section 13(c) of the FDI Act

(assistance proposals). The FDIC is rescinding the Policy Statement, as

it is duplicative of statutory requirements in the FDI Act, it is not

required by the FDI Act or necessary for purposes of the FDIC's

consideration of assistance proposals it receives. The FDIC does not

anticipate receiving many viable assistance proposals in the future, as

it is unlikely that any assistance proposals will meet the statutory

requirements.


 

DATES: This Policy Statement is rescinded May 8, 1997.


 

FOR FURTHER INFORMATION CONTACT: Herbert J. Held, Assistant Director,

Division of Resolutions and Receiverships, (202) 898-7329; Sean

Forbush, Resolutions Specialist, Division of Resolutions and

Receiverships, (202) 898-8506; Barbara I. Taft, Assistant General

Counsel, Legal Division, (202) 736-0183, Michael B. Phillips, Counsel,

Legal Division, (202) 898-3581, FDIC, 550 17th Street, N.W.,

Washington, D.C. 20429.


 

SUPPLEMENTARY INFORMATION: The FDIC is conducting a systematic review

of its regulations and written policies. Section 303(a) of the Riegle

Community Development and Regulatory Improvement Act of 1994 (CDRI)

1 requires the FDIC, the Office of the Comptroller of the

Currency, the Board of Governors of the Federal Reserve System, and the

Office of Thrift Supervision each to streamline and modify its

regulations and written policies in order to improve efficiency, reduce

unnecessary costs, and eliminate unwarranted constraints on credit

availability. Section 303(a) of CDRI also requires each of the federal

banking agencies to remove inconsistencies and outmoded and duplicative

requirements from its regulations and written policies.

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\1\ 12 U.S.C. 4803(a).

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The current Statement of Policy on Assistance to Operating Insured

Depository Institutions, which was adopted by the Board of Directors of

the FDIC, was published in the Federal Register on December 18,

1992.2 The Policy Statement, which reflects various

statutory requirements of the FDI Act, provides criteria for the FDIC's


 

[[Page 25192]]


 

consideration of proposals it receives for assistance to operating

insured depository institutions under section 13(c) of the FDI Act. The

FDIC published for comment in the Federal Register on July 3, 1996, a

proposed revision to the Policy Statement, which updated and revised

the Policy Statement.3 The proposed revision to the Policy

Statement resulted from the FDIC's systematic review of its regulations

and written policies under section 303(a) of CDRI. The following

primary changes to the Policy Statement were reflected in the proposed

revision to the Policy Statement: (i) Deletion of references to the

Resolution Trust Corporation, which statutorily ``sunset'' on December

31, 1995; and (ii) the incorporation of the requirements of section 11

of the Resolution Trust Corporation Completion Act of 1993,4

which revised section 11(a)(4) of the FDI Act, 12 U.S.C. 1821(a)(4), to

prohibit the use of the Bank Insurance Fund or the Savings Association

Insurance Fund to benefit shareholders of a failed or failing insured

depository institution, except in cases of systemic risk determined in

accordance with section 13(c)(4)(G) of the FDI Act.5

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\2\ See 57 FR 60203 (December 18, 1992).

\3\ See 61 FR 34814 (July 3, 1996).

\4\ Pub. L. 103-204 (1993).

\5\ In pertinent part, section 13(c)(4)(G) of the FDI Act, 12

U.S.C. 1823(c)(4)(G) provides that the FDIC has the authority to

provide to an operating insured institution assistance that does not

meet the requirements of section 13(c)(4)(A) of the FDI Act only if

the Secretary of the Treasury (in consultation with the President

and upon the written recommendations of two-thirds of the Board of

Directors of the FDIC and two-thirds of the Board of Governors of

the Federal Reserve System) determines that the FDIC's compliance

with section 13(c)(4)(A) of the FDI Act would have serious adverse

effects on economic conditions or financial stability and the

assistance to the operating insured institution would avoid or

mitigate such adverse effects.

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The only comment received on the proposed revision to the Policy

Statement was a letter dated November 25, 1996, from Representative

James A. Leach (R-Iowa), Chairman, Committee on Banking and Financial

Services, U.S. House of Representatives. Chairman Leach indicated his

strong opposition to providing any assistance which benefits

shareholders of a failed or failing institution, except in cases of

systemic risk as provided in section 13(c)(4)(G) of the FDI Act.

As part of its ongoing review under section 303(a) of CDRI, the

FDIC has determined that the FDIC's written policies can be streamlined

by rescinding the Policy Statement. The Policy Statement, which is

duplicative of statutory provisions of the FDI Act, is not required by

the FDI Act. It is not necessary for consideration by the FDIC of

assistance proposals it receives. Assistance proposals the FDIC

receives will be evaluated against the applicable provisions of the FDI

Act.

The Policy Statement has not been utilized much in recent years. As

section 13(c)(4) of the FDI Act requires the FDIC to select the

resolution alternative that involves the least cost to the relevant

deposit insurance fund, any open assistance proposal must be evaluated

on a competitive basis with other available resolution alternatives.

Because of the cost savings inherent in FDIC-assisted transactions

involving the appointment of a receiver for an institution, it is

unlikely that an open assistance proposal will be more cost effective

than an available closed institution resolution.6 Further,

it will be extremely difficult for assistance proposals to meet the

least-cost test, the requirements of section 11(a)(4), and other

applicable statutory requirements. The FDIC has not approved any

assistance proposals since 1992, when two proposals were approved.

During the period 1993-1996, the FDIC received only two assistance

proposals which were not approved, as they did not meet the applicable

statutory requirements.

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\6\ Among the cost advantages favoring a resolution transaction

following appointment of a receiver for an institution are the

effect of the receivership on the contingent liabilities of the

failed institution, the potential for uninsured depositors and other

unsecured creditors to share in the loss incurred on the institution

and the ability of the FDIC as receiver to repudiate burdensome

contracts.

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For the above reasons, the Policy Statement is rescinded.


 

By order of the Board of Directors.


 

Dated at Washington, D.C. this 29th day of April, 1997.


 

Federal Deposit Insurance Corporation

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 97-11966 Filed 5-7-97; 8:45 am]

BILLING CODE 6714-01-P

Last Updated: March 24, 2024